Zenith Infotech a Step Closer to Liquidation

An India court is allowing a petition by creditors to move forward that would compel Zenith Infotech to liquidate its assets to pay back its $85 million in defaulted foreign currency bonds.

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  

The days of debt-beleaguered cloud vendor Zenith Infotech may be numbered after an India court cleared the way for a liquidation petition by creditors to move forward.

According to the Economic Times, a court in Mumbai allowed a creditor petition to liquidate Zenith Infotech’s assets to recover at least part of the $85 million in foreign currency convertible bonds that the company defaulted in September 2011.

Related articles

Zenith Infotech is said to be reviewing the court’s decision and contemplating a response.

A new development in the saga, according to the Economic Times, is that Zenith Computers, a sister company to Zenith Infotech, is also facing a liquidation petition. Creditors are trying to attach the assets of other company’s controlled by the Saraf family to recover their losses.

Zenith Infotech has been battling to end the debt crisis for the last two years. Sources tell Channelnomics the management team, led by chairman Raj Saraf and managing director Akash Saraf, have attempted with no avail to settle with creditors.

From the beginning, Zenith Infotech maintained that the company was solvent and would pay back the money. However, the company has been dealt a series of blows in which its valuation, partner base and revenues have sunk.

In the most recent quarterly earnings, Zenith Infotech reported a $10 million operating loss. Since the debt crisis, the company’s valuation shrunk from approximately $120 million to less than $30 million.

No reason was ever given for why Zenith Infotech defaulted on its bonds. The default came just a week after the company sold its managed services technology to Boston-based Summit Partners for $55 million. According to international press reports, India companies had a pattern on defaulting on foreign bonds, believing the local courts wouldn’t allow creditors to pursue them. In the case of Zenith Infotech, creditors have dogged the company at that same time India courts and regulators clamped down on defaulters.

In March, the Securities and Exchange Board of India suspended Zenith Infotech’s principals from transacting stock sales and ordered the company to post a $33 million bond to resume trading. The India regulator went as far to say that Zenith Infotech had hidden money that could be used to pay down the debt; speculation is the bond was intended to force Zenith Infotech management to repatriate the money from offshore accounts.

In July, Zenith Infotech won an appeal that allowed it to trade stock without the security bond, thus giving the company and management team the ability to raise new capital to fund operations and pay down debt. However, the company’s board of directors on July 19 informed India regulators that “the accumulated losses have exceeded the net worth of the company.”

During the debt crisis, Zenith Infotech has worked to transform its business from managed services and backup to cloud infrastructure. While Zenith Infotech has shown promises as a cloud provider, its debt crisis has caused technology and reseller partners to defect to competitors.

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  
More on Channel Business
marketing-plan

Fortinet partner calls for improved marketing to secure more customers

VAR says missed opportunities result when Fortinet isn't at the forefront of end user research

call-centre-india-bpo

Cloud bringing BPaaS opportunities

NetSuite and partner talk ways channel partners can capitalize in changing BPO market

women-venture-capital-arrow

Arrow CEO points to 'comprehensive' solutions as driver for Q2 results

Distributors announces financial results, increase in sales

shutterstock-180806804-china-social-media

Microsoft Chinese partner of the year Pactera talks penetrating Chinese market

China-based provider explains obstacles in succeeding in China, why market should matter to channel

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
newspapers-and-glasses

Channelnomics' top five stories of the week - 31 July 2015

Check out which articles grabbed the most attention this week

Cloud computing graphic

Is pay-as-you-go the future for cloud?

Utility model may be the way forward

jessica-m-225x300

Editor's voice: The week's channel chatter - 31 July 2015

What's been happening this week on Channelnomics?

100m-starting-line

Alibaba gunning to overtake Amazon, Microsoft in the cloud

China’s online retail giant Alibaba plans to invest $1 billion to globalize its Aliyun cloud infrastructure division, with the intent of overtaking Amazon Web Services, Microsoft and IBM